Team,
The SEC Staff issued its first comment letter today (February 14, 2022) on the confidential Draft Registration Statement on Form S-1 (SEC File Number 333-264518; CIK 0001923847) that was submitted on January 10, 2022. The letter contains 42 comments. A copy of the full comment letter is attached to this email for your review. Calderwood & Harkness has reviewed the comments in their entirety and sets forth below a proposed response strategy, timeline, and workstream assignments for the team's consideration.
**I. Proposed Timeline**
We recommend targeting the following schedule:
- **February 25, 2022** — Internal first drafts of all responses due from responsible parties - **February 28, 2022** — C&H to circulate consolidated draft response letter to the full working group - **March 1 or 2, 2022** — All-hands call to finalize responses and resolve any open items - **March 4, 2022** — Filing of amended DRS and response letter with the SEC
This gives us approximately 18 days (roughly 2.5 weeks) from receipt to submission, which is consistent with typical first-round response timelines. Please note that Hennessy Consulting Group LLC (Martin Royce) will need the final package no later than March 3 for EDGAR formatting and filing.
**II. Categorization of Comments and Assignments**
We have organized the 42 comments into seven categories, as summarized below, together with proposed workstream assignments.
**Category 1: Revenue Recognition and Key Performance Metrics (approximately 12 comments)**
These comments focus on the Company's revenue recognition policies and ASC 606 disclosure, including several comments requesting more detailed disclosure of the Company's ARR methodology — specifically, how the reported ARR of $206.8 million (as of December 31, 2021) is calculated, including the treatment of multi-year contracts, upsells, and churn.
- *Assigned to:* Lumos management (David / Naomi) for factual input; Meridian & Howe LLP (Gregory Simmons) for accounting and audit support; C&H (Audrey Zhou / Brendan Walsh) for drafting the response and revised S-1 disclosure.
**Category 2: Non-GAAP Financial Measures (approximately 5 comments)**
The Staff's comments address the presentation of Adjusted EBITDA and reconciliation to the GAAP net loss of $(41.2) million for FY 2021 (compared to reported Adjusted EBITDA of $(18.7) million). The Staff is questioning certain add-backs and requesting enhanced reconciliation tables with clearer labeling and justification.
- *Assigned to:* Lumos management (David) and Meridian & Howe LLP (Gregory Simmons) for substantive responses; C&H to draft.
**Category 3: Dual-Class Voting Structure and Governance Disclosure (approximately 6 comments)**
The Staff requests enhanced risk factor disclosure regarding the Class B common stock (10 votes per share), which is held by co-founders Priya Subramanian and Marcus Henley. The comments also seek a clearer description of the sunset provision — specifically, the automatic conversion of Class B shares to Class A shares upon the earliest of: (i) 7 years post-IPO, (ii) transfer to a non-permitted transferee, or (iii) the founders collectively holding less than 10% of total outstanding common stock. Additionally, the Staff requests post-IPO voting control calculations; based on the current capitalization, the founders would hold approximately 73.5% of total voting power (285,000,000 Class B votes out of approximately 387,641,176 total votes).
- *Assigned to:* C&H (Audrey Zhou) to lead; Lumos (Naomi) for factual confirmation of capitalization and governance details.
**Category 4: Related-Party Transactions (approximately 4 comments)**
The Staff requests additional disclosure regarding transactions and agreements with Velthryn Venture Partners Fund IV, L.P. and Arclight Equity Group Fund VII, L.P., including investor rights agreements, registration rights, and board designation rights. The Staff also seeks clarification of board member affiliations — Jonathan Tsai as the Velthryn designee and Rebecca Stahl and Catherine Mercer as affiliated with Arclight.
- *Assigned to:* C&H (Brendan Walsh) to draft; Lumos (Naomi) to provide supporting documentation, including copies of the relevant agreements and board designation letters.
**Category 5: MD&A — Trend Analysis and Known Uncertainties (approximately 6 comments)**
The Staff requests more granular discussion in Management's Discussion and Analysis of operating trends, including: revenue growth trajectory (58% year-over-year growth in FY 2021 vs. FY 2020, from $118.6 million to $187.4 million); gross margin trends (72.3% in FY 2021); customer concentration (top 10 customers representing approximately 34% of ARR); and known uncertainties affecting the business.
- *Assigned to:* Lumos management (David) for business context and factual input; C&H (Audrey Zhou) to draft revised MD&A disclosure.
**Category 6: Executive Compensation and Equity Awards (approximately 5 comments)**
These comments address compensation tables, stock-based compensation expense, and the cheap stock analysis. In particular, the Staff is questioning the methodology for common stock valuation in periods preceding the proposed IPO, including the trajectory from the Series D preferred stock price of $12.50/share (August 2020) to the proposed IPO midpoint of $17.00/share. Comments also address the stock option pool (14,800,000 shares authorized; 11,300,000 options outstanding at a weighted-average exercise price of $4.82).
- *Assigned to:* Lumos management (David / Naomi) for factual support and third-party valuation reports; C&H (Brendan Walsh) to draft; Sylvia Hartwell (C&H Tax) to advise on tax-related compensation disclosure matters.
**Category 7: Risk Factors — Specificity (approximately 4 comments)**
The Staff requests that several generic risk factors be tailored to Lumos's specific circumstances, including regulatory risk in fintech, competition from larger enterprise software providers, the Company's history of net losses, and customer concentration risk.
- *Assigned to:* C&H (Audrey Zhou / Brendan Walsh) to revise; Lumos (Naomi) for company-specific input and business context.
**III. Coordination with Meridian & Howe LLP**
Several of the comment categories — in particular, revenue recognition (Category 1), non-GAAP financial measures (Category 2), and executive compensation/cheap stock (Category 6) — will require close coordination with Gregory Simmons and his team at Meridian & Howe. Naomi or David, could you please let us know whether you would prefer to loop in Meridian & Howe directly on the comment letter and the specific accounting-related comments, or whether you would like C&H to send the letter to them? We want to get them engaged as quickly as possible given the turnaround timeline.
**IV. Coordination with Underwriters and Underwriters' Counsel**
Per customary practice, the SEC comment letter should be shared with Pinnacle Securities (Andrew Castellano / Lisa Drummond) and Hargrove & Liddell LLP (Michael Sorrentino / Anika Patel) as underwriters' counsel. Naomi, could you please confirm authorization for us to do so? Underwriters' counsel may have additional comments or suggestions on the response that we will want to incorporate into the drafting process.
**V. Working Group Call**
We propose scheduling a working group call for later this week — targeting Wednesday or Thursday (February 16 or 17) — to walk through the comments in detail, discuss response strategy, and align on the timeline set forth above. Please confirm your availability and we will circulate an invitation.
**VI. Action Items Summary**
1. All parties to review the attached comment letter by end of day Wednesday, February 16. 2. Working group call to be scheduled for February 16 or 17 — please confirm availability. 3. Responsible parties to deliver first drafts of responses by February 25. 4. C&H to circulate consolidated response draft by February 28. 5. All-hands finalization call targeting March 1–2. 6. Amended DRS and response letter to be filed March 4. 7. Lumos to confirm authorization to share the comment letter with the Pinnacle/Whitfield syndicate and Hargrove & Liddell.
Please don't hesitate to reach out by phone or email if you have any questions or would like to discuss any of the above. We are available this evening if it would be helpful to connect ahead of the group call.
Best regards,
Audrey Zhou Calderwood & Harkness LLP 1 Market Street, Spear Tower, Suite 3600 San Francisco, CA 94105 T: (415) 773-5840 E: azhou@calderwoodharkness.com
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*Attachment: SEC Staff Comment Letter dated February 14, 2022 — Lumos Analytics Inc. Registration Statement on Form S-1 (File No. 333-264518) (42 comments)*